MONTREAL, Aug. 11, 2021 /CNW/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today reported its financial and operating results for the three-month period (or "second quarter" or "Q2") ended June 30, 2021.
Second Quarter 2021 Highlights
- Property revenue of $17.8 million, a 3.2% increase from Q2 2020
- Same property net operating income1 of $9.9 million, a 6.2% increase from Q2 2020, or 4.3% increase excluding COVID-19 related impacts
- Net operating income1 of $10.7 million, a 9.8% increase from Q2 2020
- Net income and comprehensive income of $11.1 million, compared to a net loss and comprehensive loss of $2.7 million in Q2 2020
- AFFO1 of $5.7 million, a 10.0% increase from Q2 2020
- Occupancy rate up at 98.5%
- Completion of previously announced accretive acquisitions of 18 industrial properties for $133.7 million
- Closing of previously announced $50 million private placement with major equity investor
"As we move towards a new normal and a strong restart of the economy, we are pleased with our results for the second quarter of 2021," said James Beckerleg, CEO of PROREIT.
"We continue to experience solid momentum, as evidenced by the positive trends reflected across our key operational and financial metrics. Notably, the increase in same property net operating income across our sectors of activity highlights the fundamental strength of our high-quality portfolio and stability of our tenant base. On the occupancy front, we continue to successfully renew maturing leases at favourable terms and are progressing well in our negotiations for remaining leases coming due in 2021 and 2022.
"We have maintained a solid balance sheet, underpinned by the completion of accretive portfolio acquisitions and financing transactions in the quarter. The benefits of the private placement, refinanced mortgages with improved terms and 18 property acquisitions at very attractive debt terms will be fully reflected in our third quarter results.
"Looking ahead, we are staying the course regarding our strategic plan, with a focus on the robust industrial sector while scaling up our presence in attractive Canadian mid-market cities. With our next stage of growth currently underway and many new opportunities to capture ahead, we are committed to creating long-term value to the benefit of our unitholders," Mr. Beckerleg concluded.
RESULTS
Table 1 - Financial Highlights
(CAD $ thousands except unit, per unit amounts and unless otherwise stated) |
3 Months |
3 Months |
6 Months |
6 Months |
||||
|
||||||||
Property revenue |
$ |
17,764 |
$ |
17,212 |
$ |
35,154 |
$ |
34,919 |
Net operating income (NOI) (1) |
$ |
10,731 |
$ |
9,773 |
$ |
20,824 |
$ |
20,128 |
Net income (loss) and comprehensive income (loss) |
$ |
11,101 |
$ |
(2,770) |
$ |
12,735 |
$ |
15,367 |
Total assets |
$ |
772,881 |
$ |
646,321 |
$ |
772,881 |
$ |
646,321 |
Debt to Gross Book Value (1) |
58.22% |
58.71% |
58.22% |
58.71% |
||||
Interest Coverage Ratio (1) |
2.8x |
2.8x |
2.7x |
2.9x |
||||
Debt Service Coverage Ratio (1) |
1.6x |
1.7x |
1.6x |
1.7x |
||||
Weighted average interest rate on mortgage debt |
3.50% |
3.72% |
3.50% |
3.72% |
||||
Net cash flows provided from operating activities |
$ |
7,994 |
$ |
900 |
$ |
8,201 |
$ |
4,200 |
Funds from Operations (FFO) (1) |
$ |
4,782 |
$ |
4,835 |
$ |
8,660 |
$ |
10,591 |
Basic FFO per unit (1)(2) |
$ |
0.1015 |
$ |
0.1208 |
$ |
0.1987 |
$ |
0.2649 |
Diluted FFO per unit (1)(2) |
$ |
0.0990 |
$ |
0.1180 |
$ |
0.1940 |
$ |
0.2594 |
Adjusted Funds from Operations (AFFO) (1) |
$ |
5,741 |
$ |
5,217 |
$ |
11,163 |
$ |
11,206 |
Basic AFFO per unit (1)(2) |
$ |
0.1219 |
$ |
0.1304 |
$ |
0.2561 |
$ |
0.2803 |
Diluted AFFO per unit (1)(2) |
$ |
0.1189 |
$ |
0.1274 |
$ |
0.2500 |
$ |
0.2745 |
AFFO Payout Ratio – Basic (1) |
92.3% |
86.3% |
87.9% |
96.3% |
||||
AFFO Payout Ratio – Diluted (1) |
94.6% |
88.3% |
90.0% |
98.4% |
||||
(1) |
Non–IFRS measure. See "Non–IFRS and Operational Key Performance Indicators". |
(2) |
Total basic units consist of trust units of the REIT and Class B LP Units (as defined herein). Total diluted units also includes deferred trust units and restricted trust units issued under the REIT's long–term incentive plan. |
PROREIT owned 107 investment properties as at June 30, 2021, compared to 93 properties at the same time last year. Total assets amounted to $772.8 million as of June 30, 2021, representing an increase of $126.5 million, or 19.6%, compared to $646.3 million on June 30, 2020. During the twelve-month period ended June 30, 2021, PROREIT acquired 18 industrial investment properties and sold four non-strategic investment properties at or above their related carrying values.
For the second quarter ended June 30, 2021:
- Property revenue amounted to $17.8 million, an increase of $0.5 million, or 3.2%, compared to the same prior year period. The increase relates to the favourable impact of the net property acquisitions in the twelve-month period ended June 30, 2021.
- Same property net operating income1 reached $9.9 million, an increase of $0.6 million, or 6.2%, compared to the same prior year period. Excluding COVID-related expenses of $0.2 million recorded in the second quarter of 2020, same property net operating income increased by 4.3% in Q2 2021 compared to the same prior year period. The growth reflects increased occupancy, contracted rent steps, and higher net renewal rents in the portfolio.
- Net operating income1 reached $10.7 million, a $1.0 million or 9.8% increase, compared to the same prior year period. The change is mainly attributable to the net increase in the number of properties in the twelve-month period ended June 30, 2021.
- Net income and comprehensive income amounted to $11.1 million, compared to a loss of $2.8 million for the same prior year period. The increase relates to the net impact of non-cash fair value adjustments in investment properties as well as the favourable variance in net operating income in the second quarter of 2021 compared to the same prior year period.
- AFFO1 totaled $5.7 million, a $0.5 million or 10.4% increase, compared to $5.2 million for the same period last year. The increase reflects the favourable impact of the net property acquisitions in the twelve-month period ended June 30, 2021.
- Net cash flows provided from operating activities was $7.9 million, compared to $0.9 million for the same prior period. The change is mainly attributable to the net change in non-cash working capital in comparing the respective periods.
- AFFO payout ratio1 stood at 92.3% compared to 86.3% for the same prior year period. The increase in the payout ratio as well as the reduction in the corresponding per unit amounts relate to the impact of the timing of the deployment of funds from the private placement and incremental monthly distributions paid in the current quarter on the newly issued units from the private placement.
For the six-month period ended June 30, 2021:
- Property revenue was $35.2 million. The increase of $0.2 million compared to the same period last year is primarily due to incremental revenues from the net property acquisitions completed in the twelve-month period ended June 30, 2021.
- Same property net operating income1 was $19.6 million, an increase of $0.3 million or 2.6%, compared to the same period last year. Excluding COVID-19 related expenses of $0.1 million recorded in the second quarter of 2020, the increases was 2.0%. The growth reflects increased occupancy, contracted rent steps, and higher net renewal rents in the portfolio.
- Net operating income1 was $20.8 million, an increase of $0.7 million or 3.5%, compared to the same period last year. This increase results primarily from the favourable impact of the net property acquisitions in the twelve-month period ended June 30, 2021.
- Net income and comprehensive income amounted to $12.7 million, a decrease of $2.6 million compared to the same prior year period. The difference relates to non-cash fair value adjustments in investment properties, the impact of the non-cash fair value of Class B LP Units (as defined below) and the variance in non-cash long-term incentive plan expense for the first six months of 2021, compared to the same prior year period.
- AFFO1 totaled $11.2 million, comparable to the same prior year period.
- Net cash flows provided from operating activities was $8.2 million, compared to $4.2 million for the same prior period. The change is due to net changes in non-cash working capital, long-term incentive plan expense, and fair value adjustments to Class B LP units and investment properties in comparing the respective periods.
- AFFO payout ratio1 stood at 87.9% compared to 96.3% for the same period last year. This improvement is mainly due to the change in monthly distributions starting April 2020.
Solid Balance Sheet and Liquidity Position
PROREIT is committed to steadily improving its balance sheet and liquidity position, including improving its debt to gross book value ratio. As at June 30, 2021, PROREIT had in excess of $20 million of operating liquidity through cash on hand and undrawn operating facilities. At the end of the quarter, PROREIT's debt to gross book value ratio1 was 58.2%.
During the second quarter, PROREIT closed its previously announced $50 million private placement with Collingwood Investments Incorporated, a member of the Bragg Group of Companies of Nova Scotia. PROREIT also entered into a new $24.8 million mortgage financing with a term of seven years at a rate of 3.70%, to refinance six retail properties.
Portfolio Transactions
During the second quarter of 2021, PROREIT completed the acquisition of 18 previously announced properties and sold one non-strategic property:
- On April 23, 2021, PROREIT closed its previously announced acquisition of a 100% interest in three light industrial buildings in Ottawa, Ontario, for an aggregate purchase price of $49.2 million before closing costs.
- On April 28, 2021, PROREIT sold a non-strategic retail property located in Fredericton, New Brunswick, for gross proceeds of $4.9 million, marginally above IFRS carrying value.
- On May 14, 2021, PROREIT acquired an industrial building in Moncton, New Brunswick, for $4.5 million before closing costs.
- On May 25, 2021, PROREIT closed its previously announced acquisition of a light industrial property located in Winnipeg, Manitoba, for an aggregate purchase price of $5.2 million before closing costs.
- On June 28, 2021, PROREIT closed its previously announced acquisition of a 100% interest in five single-tenant light industrial properties located in four of Atlantic Canada's major cities, for an aggregate purchase price of $42.5 million before closing costs.
- On June 29, 2021, PROREIT closed its previously announced acquisition of a 100% interest in eight light industrial buildings in Winnipeg, Manitoba, for an aggregate purchase price of $32.3 million before closing costs.
Table 2- Total Portfolio Base Rent
BY ASSET CLASS
June 30, 2021 |
June 30, 2020 |
|||
Number of |
% |
Number of |
% |
|
Retail |
47 |
30.4 |
49 |
36.2 |
Office |
9 |
13.2 |
10 |
15.7 |
Industrial |
51 |
56.4 |
34 |
48.2 |
TOTAL |
107 |
100.0 |
93 |
100.0 |
BY PROVINCE
June 30, 2021 |
June 30, 2020 |
|||
Number of |
% |
Number of |
% |
|
Maritime Provinces |
43 |
40.5 |
39 |
42.3 |
Quebec |
14 |
11.7 |
16 |
14.7 |
Western Canada |
35 |
17.0 |
26 |
14.4 |
Ontario |
15 |
30.8 |
12 |
28.6 |
TOTAL |
107 |
100.0 |
93 |
100.0 |
PROREIT's portfolio is diversified by asset class and geography, focused on strategic locations in attractive mid-sized Canadian markets. Acquisitions made during the twelve-month period ended June 30, 2021 have further diversified the portfolio. Industrial exposure increased to 56.4% at the end of the second quarter of 2021, compared to 48.2% a year ago. Acquisitions made in Winnipeg and Ottawa have increased PROREIT's geographic presence in Ontario and Manitoba.
Table 3- Operational Highlights
June 30 |
June 30 |
|
|
||
Number of properties |
107 |
93 |
Gross leasable area (square feet) ("GLA") |
5,510,707 |
4,580,932 |
Occupancy rate (1) |
98.5% |
98.1% |
Weighted average lease term to maturity (years) |
4.8 |
5.4 |
(1) |
Occupancy rate includes lease contracts for future occupancy of currently vacant space. Management believes the inclusion of this committed space provides a more balanced reporting. The committed space at June 30, 2021 was approximately 99,039 square feet of GLA (12,728 square feet of GLA at June 30, 2020). The occupancy at June 30, 2021 excludes an 82,000 square foot building under redevelopment. |
GLA increased 20.3% to 5,510,707 square feet at June 30, 2021, compared to 4,580,932 square feet at June 30, 2020. The increase of 929,775 square feet is mainly attributable to the net increase in investment properties in the twelve-month period ended June 30, 2021.
Leasing momentum continued in the second quarter of 2021. Occupancy rate increased to 98.5% as of June 30, 2021, compared to 98.1% a year earlier, with substantially all rent collected in Q2 2021. PROREIT has renewed approximately 80% of total square feet maturing in 2021 at positive spreads averaging 4%, as well as 17% of 2022 renewals at positive spreads averaging 3%.
PROREIT's tenant mix is well diversified by industry sector. As of June 30, 2021, approximately 79% of portfolio base rent is from national and government tenants. Approximately 66% of base rent in the retail segment is from tenants providing necessary services to the public, including groceries, pharmacies, financial institutions, government offices and medical offices. The ten largest tenants in PROREIT's portfolio accounted for approximately 33.7% of annual base rent at June 30, 2021, compared to 37.5% at March 31, 2021, and have an average remaining lease term of 5.9 years.
Distributions
Distributions to unitholders of $0.0375 per trust unit of the REIT were declared monthly during the three months ended June 30, 2021, representing distributions of $0.45 per unit on an annual basis. Equivalent distributions are paid on the Class B limited partnership units of PROREIT Limited Partnership ("Class B LP Units"), a subsidiary of the REIT.
Strategy and Outlook
PROREIT remains committed to driving growth and creating value for unitholders, while maintaining a solid financial position in order to make sound capital allocation decisions on a long-term basis.
With the restart of the economy and debt financing available at historically low interest rates benefiting the real estate market, business outlook is positive. PROREIT has resumed its growth strategy, focused on the acquisition of high-quality, low-risk real estate in the many attractive Canadian mid-sized cities, with increased exposure to the industrial sector.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its second quarter 2021 results on August 12, 2021, at 10:30 a.m. EDT. There will be a question period reserved for financial analysts. To access the conference call, please dial 888-664-6383 or 416-764-8650 or 514-225-6995 (conference: 69006300). A recording of the call will be available until August 19, 2021 by dialing 888-390-0541 or 416-764-8677 Access code: 006300 #
The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or at https://produceredition.webcasts.com/starthere.jsp?ei=1480387&tp_key=2df42416b7
About PROREIT
PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate investment trust owning a diversified portfolio of diversified commercial properties across Canada. Established in March 2013, PROREIT is mainly focused on strong primary and secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in Western Canada. For more information, go to: www.proreit.com
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). In this press release, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including net operating income ("NOI"), adjusted funds from operations ("AFFO"), debt to gross book value, interest coverage ratio, debt service coverage ratio, funds from operations ("FFO"), AFFO payout ratio and same property net operating income ("same property NOI"). These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as management of the REIT believes they are relevant measures of PROREIT's underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT's performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the "Non-IFRS and Operational Key Performance Indicators" section in PROREIT's management's discussion and analysis for the three month period ended June 30, 2021, available under PROREIT's profile on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.
Forward-looking statements contained in this press release include, without limitation, statements pertaining to the execution by PROREIT of its growth strategy, the future economic activity, PROREIT's acquisition pipeline, economic conditions and the future performance of PROREIT. PROREIT's objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT's operations, including its financing capacity and asset value, will remain consistent with PROREIT's current expectations; (v) the performance of PROREIT's investments in Canada will proceed on a basis consistent with PROREIT's current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt. Without limitation, there can be no assurance that any discussions or agreements PROREIT may have concerning future acquisitions will result in definitive agreements or property acquisitions, and, if they do, what the terms or timing of any such acquisitions would be.
The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.
Additional information about these assumptions and risks and uncertainties is contained under "Risk Factors" in PROREIT's latest annual information form and "Risk and Uncertainties" in PROREIT's management's discussion and analysis for the three month period ended June 30, 2021, which are available under PROREIT's profile on SEDAR at www.sedar.com.
_____________________ |
1 Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators". |
SOURCE PROREIT
Investor Relations: PRO Real Estate Investment Trust, James W. Beckerleg, President and Chief Executive Officer, 514-933-9552; PRO Real Estate Investment Trust, Gordon G. Lawlor, CPA, CA, Executive Vice President, Chief Financial Officer and Secretary, 514-933-9552
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